Petro Rio Buys Chevron's Frade Field in Brazil Expansion

(Bloomberg) -- Independent Brazilian oil producer Petro Rio SA will take control of the Frade field off the country’s coast after agreeing to buy Chevron Corp.’s 52 percent stake, and more acquisitions may be on the way. Petro Rio’s shares surged.

Petro Rio will own 70 percent of Frade and have control of operations, becoming the largest Brazil-based independent oil producer in the country, with an estimated output of 28,000 barrels of equivalent oil a day, it said in a statement. It also owns stakes in the producing fields Polvo and Manati. Shares rose as much as 14 percent in Sao Paulo.

“We’re are in great financial health,” Chief Executive Officer Nelson Queiroz Tanure said in a telephone interview. “We have a preference for producing fields that generate cash.”

Petro Rio will pay more than $500 million, a person familiar with the matter told Bloomberg before the deal was announced. Chevron and Petro Rio said the value will only be announced after formal procedures are concluded.

Petro Rio made a $500 million bid for Petrobras’s Bauna field in 2016 that was rejected. Petrobras is still seeking buyers for the offshore project, said the person, adding that Petro Rio is among the bidders. Petro Rio declined to comment on specific fields it is considering for acquisition.

In October, Petro Rio bought a 18 percent stake in Frade from Frade Japao Petroleo Ltda. State-run Petroleo Brasileiro SA has the remaining 30 percent of the field. Petro Rio said it will continue with current production levels and focus on synergies between Frade and its neighboring field Polvo. Investments at Polvo are confirmed, with four wells planned for the second half of 2019.

Frade currently produces from shallow reservoirs, but deeper pre-salt formations have been identified and Petro Rio will consider exploring them, possibly in 2020, Tanure said.

Oil Spill

Chevron is leaving Frade after an oil spill in 2011 triggered nationwide outcry and stained the U.S. producer’s image in the country.

Production was temporarily suspended after the 3,000-barrel spill. The San Ramon, California-based company paid a fine of roughly $12 million to the oil regulator in 2012, and was allowed to resume operations in parts of Frade in April 2013. Months later Chevron agreed to pay $41.7 million to settle an environmental lawsuit.

Chevron operated at a reduced level in Brazil for almost seven years after the Frade accident. In 2018, it started competing for ultra-deepwater fields in Brazil’s prized pre-salt region in the Atlantic Ocean.

In September, Chevron was one of the most aggressive bidders in a pre-salt auctions and won six blocks in partnership with Petrobras and other producers.

The Frade sale is part of Chevron’s efforts to manage its global portfolio and the company is committed to pursuing operations in Brazil and in the world-class pre-salt region, it said in a statement.

--With assistance from Kevin Crowley.

To contact the reporter on this story: Sabrina Valle in Rio de Janeiro at svalle@bloomberg.net

To contact the editors responsible for this story: Simon Casey at scasey4@bloomberg.net, Peter Millard

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